Global Market Situation & Outlook 2011/12 - Part 2
The World Meat Markets
conference was held in Divonne-les-Bains, France earlier in
December. Canfax
Research was there and filed this report. Part I
ran on page 1. Part 2 provides an outlook on demand for
beef, pork and poultry.
Beef
In 2008, before the
global recession hit in the fourth quarter there were many
changes to global
beef trade due to growing demand in dynamic markets with a
growing middle
class. As the global recession has been dealt with in some
regions and become
further entrenched in others, demand regions have once again
shifted resulting
in exporting countries changing where they move product to -
depending on the
exchange rates and price.
Global beef production
is projected to be down 0.6 per cent in 2012 after being down
0.9 per cent in
2011. The decline in the global cattle herd is slowing as
Australia and
Argentina consolidate and look at expansion, while Brazil
continues its slow
growth. Production of grain fed beef continues to be
constrained as the U.S.
herd continues to decline with drought and feed shortages. The
largest declines
in beef consumption have been seen in the US (-3.5%), EU
(-1.7%) and Argentina
(-6%) in 2011 while growth occurred in Brazil (+1.2%), MENA
(+2.6%), Korea
(+10.4%), and Russia (+1%). As global beef supplies have
tightened prices have increased
resulting in total expenditures on wholesale beef increasing
by nearly 60 per
cent over the last 10 years.
One thing to keep in
mind in terms of future beef production is the contribution of
the dairy herd,
which is seeing increased demand particularly in countries
like India and
China. Indian milk consumption has been growing at 8 per cent
per year and it
is expected that India will soon need to import. The largest
milk producers in
the world are the EU (21%), India (16%), U.S. (13%), China
(4%) and New Zealand
(3%). While New Zealand accounts for only 3 per cent of global
production, it
exports 95 per cent of production and sets world prices. Milk
demand is
expected to grow by 53 billion liters, up 10 per cent over the
next five years.
The cost of producing milk will become a more important factor
in determining
the location of herds in the future as there is an increased
globalization of
prices with regional prices (U.S., NZ and Germany) moving
together. Increasing
beef production from dairy cows is desirable as they provide
lean trim product,
which is in high demand around the world. Forty-eight per cent
of beef consumed
in North America is hamburger and that proportion is even
higher in the EU at
53 per cent. When evaluating the various production regions in
the world,
Canada is well-situated in terms of resources to increase
production for the
global market.
Pork
Disease issues reduced
pork production in 2011 with Porcine Reproductive and
Respiratory Syndrome
virus (PRRS-V) in China resulting in 1.5 million tonnes of
product being
removed from production. In order to manage inflation, imports
were opened up
and measures were taken to maintain the price signal to
domestic producers to
increase production. South Korea removed a third of their
domestic herd in
early 2011 following the Foot-and-Mouth Disease (FMD) outbreak
in December
2010. Russia continues to have challenges with African Swine
Fever (ASF) with
an increase in the incidences reported. Concerns are that the
disease may be
present in the wild boar population and is approaching the
European Union (EU)
border. Bans have been proposed but nothing has been adopted
yet to control
this issue. It is estimated that as many as 1 million hogs
would have to be
removed from the herd.
In 2012, global pork
production is expected to be up 1.6 per cent as Asian herds
recover. Reduced
herd numbers in Asian countries will result in increased
reliance on imports
over the short term, with the U.S. and Canada being the major
beneficiaries as
well as the EU to some extent. Global pork consumption is
projected to be up
1.7 per cent in 2012 with a rebound in Asian countries.
However, high prices
are limiting consumption growth.
Poultry
Poultry is the winner
in tough economic times as consumers trade down to cheaper
protein options. It
is also the first winner as increased disposable incomes
provide more dollars
for protein consumption and it is the first step on the
ladder. Global poultry
production was up 3 per cent in 2011 and is projected to be up
another 2.3 per cent
in 2012. The largest growth regions are China (+4.5%), Brazil
(+3%) and Russia
(+7.5%).
At the same time the
U.S. industry has been challenged with higher feed prices and
reduced export
market access. U.S. has been banned from the Russian and
Chinese markets which
represent important markets for U.S. legs. This has increased
U.S. domestic
supplies and pressured prices lower in 2011; resulting in the
U.S. poultry
industry contracting. The U.S. has recently gone to the WTO on
the Chinese ban.
